Small Business Information About
GST HST in Canada

Harmonized sales tax (HST) is a combination of federal goods and services tax (GST) and provinces who previously charged provincial sales tax (PST).

Its purpose was to reduce the administrative burden on small businesses around collecting and remitting sales taxes. Combining GST and PST in provinces that chose to participate was the first step to creating a consistent tax across the country.

It came into effect on July 1, 2010. During the first week of May 2010, harmonized sales tax transitioning rules went into play.

In 2010, if you were already registered for GST, you were automatically registered for HST. The thresholds for HST remained the same as for GST ... $30,000.

BC initially transitioned to HST in 2010 but a referendum required BC to re-implement PST + GST on April 1, 2013. On the same date, Prince Edward Island implemented HST.

Quebec harmonized with GST on January 1, 2013. However, it is important to note that Quebec is NOT classified as a participating province. PST is no longer charged on GST. Financial services are also exempt instead of zero rated.

The short answer is yes.

I attended a webinar titled A Deeper Tax Knowledge; sponsored by Institute of Professional Bookkeepers of Canada - IPBC [rebranded as Canadian Professional Bookkeepers of Canada] in April 2010. The speaker was the esteemed Evelyn Jacks of The Knowledge Bureau.

One of the topics discussed was the necessity for a bookkeeper to understand how sales taxes in Canada are applied.

Bookkeepers need to know what documents to collect to ensure their recordkeeping is in compliance with Canadian tax laws. They need to know and apply the rules for accurate data entry.

Regular reporting and remitting of sales tax collected is mandatory. Failure to prepare or store the necessary documents may lead to costly fines and penalties to the small business owner as well as the stress of being audited.

Professional services like accounting and bookkeeping fell through the cracks under PST. So while taxes on services were increased with the implementation of HST, the input tax credits offset which reduced the regressiveness of the tax somewhat.

When HST came into effect on July 1, 2010, provincial governments began paying the harmonized sales tax upfront on all of its purchases and claim a rebate from CRA for eligible HST amounts.

This meant businesses no longer had to separate government purchases. Ontario HST Information Notice 6 has more information on how this worked.

Its important to note foreign diplomats are not exempt from collecting or paying GST or HST.

If the business owner is NOT a GST/HST registrant, you set up your books a little differently as you don't need to track your goods and services tax or your harmonized sales tax paid.

If you are not an HST/GST registrant, you will NOT be collecting GST (and should not as you are not authorized to). This means you do not qualify for input tax credits so there is no need for your accounting system to track the sales tax you pay.

In this case, when you record any purchase or expense that has sales taxes, the sales tax amount is either expensed or capitalized.

For example, if you purchased printer toner for $150 before taxes, you would record $168 to the expense account Office Supplies if you lived in BC (GST = 5% and PST = 7%). In Saskatchewan, the amount would be $166.50 (because the PST rate is 6%). 


GST HST in Canada Tip

Even though you don't have to, you may want to track how much GST tax you are paying ... so you can see how much money you are leaving on the table by not registering for GST/HST.

To track your GST tax expense separately, create an expense account called Sales Taxes or GST Paid. In the QuickBooks® accounting system, the account setup is done through your chart of accounts.

Each time you purchase something, you would code the GST amount (not the PST) to this expense account. This is one of the ways of how to use QuickBooks® to give you management information to run your business.

Both BC and Ontario had HST exemptions just like they did with GST. They also introduced point of sale rebates for certain items on the provincial portion of the harmonized sales tax. BC point of sale rebates were slightly different than Ontario point of sale rebates.

For the short time HST was in effect in BC, BC residents, unlike Ontario residents, received a residential energy rebate.

The new housing rebate was made available on new homes purchased as a principal residence in Ontario and BC. Ontario also introduced a new rental housing rebate.

Just a reminder that US sales are generally zero rated supplies ... which is different than exempt supplies.

As Ontario transitioned to HST, insurance in Ontario continued to attract RST. Insurance businesses were automatically registered, while others needed to register before June 30, 2010.

BC's insurance premiums were exempt from HST.

Hotel room tax and alcohol tax was replaced with the harmonized sales tax while private vehicle sales are still charged provincial sales tax. That includes private sales of boats and aircraft in BC.

C. Stuart McKelvie, FCA wrote an excellent article in the Winnipeg Free Press on June 26, 2010. Every business owner in Alberta, Saskatchewan, Manitoba, and PEI should take to time to read .

Coming HST not an issue here? Think again discussed:

• how the new place of rules affect your business;
• how are cash sales charged;
• how invoicing requirements ... and possibly the charging of harmonized sales tax ... change when the sale is over $150;
• the threes instances when your participating province customers needs to self assess HST ... in 2010 that would have been customers from BC, Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador;
• when a business doesn't have to self-assess harmonized sales tax ... learn about the 90% rule;
• how to recover your input tax credits; and
• what to do if you are charged the wrong amount of sales tax.

This excellent article is located at www.winnipegfreepress.com> Business> coming-hst-not-an-issue-here-think-again-97216964.html .

Here's how I think bookkeeping software makes tracking GST HST in Canada significantly easier and more efficient:

1. Automated Calculations: With bookkeeping software like QuickBooks Online Canada, businesses can automate the calculation of GST HST on their sales and purchases.

2. Tracking: The software can keep track of all the GST HST charged on sales and paid on purchases throughout the financial year. This removes the need for you to manually track and calculate this data, saving you time and reducing the likelihood of human error.

3. Reports: Bookkeeping software generates these wonderful reports that provide summaries of the amounts of GST HST collected and paid out. This simplifies the process of preparing tax returns. You can also drill down to get the details during an audit or print the detailed GST HST report. QuickBooks Online Canada even has an Exceptions Report if the GST HST claimed in prior periods has changed.

4. Compliance: Using software helps you ensure that your GST HST tracking is compliant with Canada Revenue Agency (CRA) rules and regulations, by standardizing the way you record and report these transactions.

5. Digitized Records: The software also neatly organizes and stores all your transaction records digitally. This helps in audit situations, and also makes accessing any past transactions quick and easy. I also like I can create financial statements comparing the current year to the prior year. That feature is a great analysis tool.

6. Integration: If your business uses other financial or operational software, you can usually integrate it with your bookkeeping software. This connectivity aids in real-time tracking of the GST HST throughout your financial or supply chain.

By helping track and manage GST HST through these methods, bookkeeping software can play an essential role in simplifying the accounting process and ensuring accuracy.